A Comparative Study of Pricing Option with Efficient Methods

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Published: Dec 13, 2021
Keywords:
Binomial method Trinomial method Monte Carlo simulation Black-Scholes-Merton model
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Sujon Chandra Sutradhar
A B M Shahadat Hossain

Abstract

Our main objective of this paper is to introduce four individual techniques of pricing options; the techniques are Binomial method, Trinomial method, Monte Carlo simulation and Black-ScholesMerton model. Because they play a significant role in option valuation of stock price dynamics, risk managements as well as stock market. In this paper, we briefly discuss all these four methods with their properties and behavior. We also focused on numerical technique for the higher accuracy of option pricing and compare them graphically. We use the Computer Algebra System (CAS) Python (Edition 2019.3.1) for this purpose.

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Issue:
Vol. 7 No. 01 (2020): Volume 07, Issue 01, December-2020
Area :
Articles
Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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